Daily News

The Netherlands – Randstad sees gradual slowdown in Europe

16 February 2012

The world’s second largest staffing firm, Randstad (RAND:AEX), announced its annual and fourth-quarter results, reporting a gradual slowdown in Europe as the debt crisis hit the market although the company performed strongly in North America.

The firm also announced a net loss of €16.5 million against a profit of €138.5 million in the fourth quarter of 2010, mainly caused by a non-cash impairment charge on goodwill of €125 million.

However, in the fourth quarter revenue went up +13% to €4.377 million from €3.891 million in the previous year. Organic growth was 4% while the underlying EBITA was up +1% to €163.3 million from €4161.5 million, with an EBITA margin at 3.7%.

Gross profit in Q4 2011 amounted to €801.1 million compared to €736.7 million in Q4 2010 (organic decline of -4%) while operating expenses decreased -2% to €637.8 million from €575.2 million in the previous quarter. The gross margin was at 18.3%, compared to 18.9% in 2010.

The firm recorded a decline in the temp margin of -0.8%, which “reflects the continuing change in our business mix. In addition, the pricing environment remains challenging but is not different from the previous quarter. On a sequential basis the temp margin declined by only 0.2%, similar to the previous quarter.”

Permanent fees in the quarter grew by +15%, however on an organic basis perm fees were at the same level as last year. Overall, permanent fees made up +1.5% of revenue and 8.2% of gross profit, compared to 7.6% in Q4 2010.

Commenting on the revenue numbers in the fourth quarter, the firm stated that “although we still see seasonal patterns, the trends differ per country. North America continued its solid performance and grew by 10% per working day, in line with the previous quarter. Growth in our US staffing business improved from 3% in Q3 to 7% in Q4, while SFN's growth strengthened as well.”

“In France, where we outperformed the market, growth continued but slowed down towards the end of the quarter. German revenue grew by 8% per working day. In the Netherlands, Randstad gained further market share whereas revenue of Tempo-Team and Yacht was under pressure, partly because of the continued slow demand in the public sector. In the UK revenue was 7% below last year. Continued weak demand in the City-oriented business and, still, in the public sector put the UK business further under pressure. The slowdown in Iberia was more pronounced as revenue contracted by 6%.”

“Growth in staffing and inhouse services both eased to 0% and 6%, mainly as a result of the gradual slowdown in the industrial segment. Growth in the administrative segment remains limited and is still lower than the industrial segment. Professionals grew by 3% organically, somewhat below the 7% in Q3 2011. Over the past few months we reinforced our focus on client profitability, which resulted in exiting some low margin contracts in countries such as Poland and the US.”

Overall, revenue in the year 2011 amounted to €16,224 million, up +14% from €14,179 million while gross profit also increased to €2.957 million in 2011 from €2.658 million in 2010, an annual change of +5%. Operating expenses in the year grew organically by +3% from €2,149 million in 2010 to €2,356 million in 2011.

Global performance in the fourth quarter 2011

In the Netherlands, revenue remained marginally unchanged and amounted to €750.5 million in 2011 compared to €753.9 million in 2011. The firm claimed to perform “well ahead of the market,” mainly driven by strong performance in in-house and payroll services. However, the industrial segment continued to slow gradually as clients became more cautious.

Revenue of Tempo-Team and Yacht declined by a low single digit rate. As a result, both companies made further adjustments to their organizations, especially in management and head office. Overall revenue growth per working day in the private sector was 3%.

The firm’s overall exposure to the Dutch public sector was 14% in line with the previous quarter. The Dutch EBITA margin reached 6.1% compared to 6.8% in Q4 2010. The decrease is mainly caused by ongoing changes in the business mix, growth in large accounts and limited contributions from professionals businesses. EBITA was adjusted for restructuring costs of €18.8 million, of which € 2.6 million were in gross profit.

In France, revenue went up +4% from €834.9 million compared to €805.9 million in Q4 2010. Revenue per working day increased by +5% compared to 10% per working day in the previous quarter. Growth slowed in November and December, mainly because of the strong comparison base, but also because of lower demand.

Inhouse services grew solidly by 31% while growth in the professionals business slowed to 2%, which was mainly driven by lower demand in IT and finance. Healthcare continued to grow steadily. Perm fees were below last year, mainly caused by a weak December. The EBITA margin reached 2.9%.

In Germany, revenue grew +3% organically to €493.7 million from €479.6 million in 2010, or 8% per working day. The gradual slowdown in staffing and inhouse business was partly offset by strong performance in professional staffing. The firm raised prices to compensate for higher salary costs, as Germany introduced a new Collective Labour Agreement last year.

Growth in professionals remained strong, led by the IT segment. Operating expenses were adjusted by €3.6 million relating to the divestment of the aerospace, Teccon. The EBITA margin reached 6.6% compared to 7.5% in Q4 2010.

In Belgium and Luxembourg, the firm recorded a gradual slowdown in demand and revenue decreased by -3% from €357.6 million in 2010 to €347.3 million in 2011. Revenue per working day was -1% below last year.

The staffing and inhouse business also performed below the market, partly because of better focus on client profitability. The EBITA margin reached 5.4%.

In the UK, revenue decreased -9% to €191.8 million compared to €209.3 million in 2010. On an organic basis and adjusted for working days, revenue was 7% below last year. This is mainly due to the decline in demand in the City-oriented business and because permanent fees were -15% below those last year. The growth of the firm’s inhouse business also slowed and inhouse revenue was -2% below last year while professional, engineering and graduate recruitment maintained a good performance.

In Iberia, the shaken economy has affected revenue which dropped to €212.3 million in 2011 from €231.3 million in 2010, a change of -10%. The EBITA also went down -6%. However, in other European countries revenue increased +5% from €221.7 million to €234 million, with an EBITA of 6.5%.

As mentioned earlier, North America performed strongly with revenues increasing by +89% or 10% organically per working day. Perm fees in North America were up +44% organically. Newly acquired SFN contributed revenue of €393 million and growth within this business strengthened.

For the rest of the world it was particularly Japan that stood out as revenue there was -4% below last year. Revenue for the combined business in Australia and New Zealand remained flat while China, which has a strong focus on permanent recruitment, maintained solid growth. The Indian business grew by +20%. In Latin America, the performance of the Mexican and Argentinian business further strengthened, the later based on strong growth in permanent, while in Brazil and Chile revenues were under pressure.

Performance by category

Staffing revenue grew by +11%, particularly in North America, whereas in Europe growth eased. Overall demand there is still primarily driven by industrial clients, while growth in the administrative segments remained moderate. The EBITA margin reached 3.9%, partly impacted by the addition of SFN's staffing business and “unfavourable” wage cost-related items in Germany.

Inhouse services grew by +6% organically compared to 18% in the previous quarter with France and North America leading the way. Besides the ongoing transfers from Staffing, growth at existing clients accelerated. Belgian and UK inhouse revenue were under pressure. The EBITA margin reached 4.2%.

Professionals grew +24% or +3% organically compared to 7% in the previous quarter. Perm fees grew by 19%, mainly attributable to SFN. In France the healthcare business continued to grow in, while IT and engineering were under pressure. The overall profitability of professionals continued to improve gradually and reached 4.1% although they were affected by low contributions from the Netherlands and the UK.

In early trading, Randstad’s share price was €26.18 down -6.15% on the day, -37.54% down year on year but +33.79% above the 52-week low of €19.59 set on September 13, 2011. This means the company is valued at €4.77 billion.

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